Putin’s People

The story of how and when Putin actually resigned, and how he came to work for Sobchak, is the story of how a KGB cadre began to morph in the country’s democratic transformation and attach themselves to the new leadership. It’s the story of how a faction of the KGB, in particular part of its foreign-intelligence arm, had long been secretly preparing for change in the tumult of the Soviet Union’s perestroika reforms. Putin appears to have been part of this process while he was in Dresden. Later, after Germany reunified, the country’s security services suspected he was part of a group working on a special operation, ‘Operation Luch’, or Sunbeam, that had been preparing since at least 1988 in case the East German regime collapsed.[4] This operation was to recruit a network of agents that could continue to operate for the Russians long after the fall.

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DRESDEN – When Putin arrived in Dresden in 1985, East Germany was already living on borrowed time. On the verge of bankruptcy, the country was surviving with the help of a billion-DM loan from West Germany,[5] while voices of dissent were on the rise. Putin arrived there at the age of thirty-two, apparently fresh from a stint training at the KGB’s elite Red Banner academy for foreign-intelligence officers, and began work in an elegant art deco villa with a sweeping staircase and a balcony that overlooked a quiet, brightly-painted neighbourhood street. The villa, surrounded by leafy trees and rows of neat family homes for the Stasi elite, was just around the corner from the grey sprawl of the Stasi headquarters, where dozens of political prisoners were held in tiny windowless cells. Hans Modrow, the local leader of the ruling Communist Party, the SED, was known as a reformer. But he was also heavy-handed in his efforts to clamp down on dissent. All around the eastern bloc, the mood of protest was increasing amidst the misery and shortages of the planned economy and the brutality of state law-enforcement agencies. Sensing an opportunity, US intelligence agencies, with the help of the Vatican, had quietly started operations to funnel printing and communications equipment and cash to the Solidarność protest movement in Poland, where dissent against the Soviets had always been the strongest.

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Vladimir Putin had long dreamed of a career in foreign intelligence. During the Second World War his father had served in the NKVD, the Soviet secret police. He’d operated deep behind enemy lines trying to sabotage German positions, narrowly escaping being taken prisoner, and then suffering near fatal wounds. After his father’s heroics, Putin had been obsessed from an early age with learning German, and in his teenage years he’d been so keen to join the KGB that he called into its local Leningrad office to offer his services even before he’d finished school, only to be told he had to graduate from university or serve in the army first. When, in his early thirties, he finally made it to the elite Red Banner school for foreign-intelligence officers, it was an achievement that looked to have secured his escape from the drab struggle of his early life. He’d endured a childhood chasing rats around the stairwell of his communal apartment building and scuffling with the other kids on the street. He’d learned to channel his appetite for street fights into mastering the discipline of judo, the martial art based on the subtle principles of sending opponents off balance by adjusting to their attack. He’d closely followed the local KGB office’s recommendation on what courses he should take to secure recruitment into the security services and studied at the Leningrad University’s law faculty. Then, when he graduated in 1975, he’d worked for a while in the Leningrad KGB’s counter-intelligence division, at first in an undercover role. But when he finally attained what was officially said to be his first foreign posting, the Dresden station Putin arrived at appeared small and low-key, a far cry from the glamour of the station in East Berlin, where about a thousand KGB operatives scurried to undermine the enemy ‘imperial’ power.[6]

When Putin came to Dresden, there were just six KGB officers posted there. He shared an office with an older colleague, Vladimir Usoltsev, who called him Volodya, or ‘little Vladimir’, and every day he took his two young daughters to German kindergarten from the nondescript apartment building he lived in with his wife, Lyudmilla, and the other KGB officers. It seemed a humdrum and provincial life, far away from the cloak-and-dagger drama of East Berlin on the border with the West. He apparently played sports and exchanged pleasantries with his Stasi colleagues, who called their Soviet visitors ‘the friends’. He engaged in small talk on German culture and language with Horst Jehmlich, the affable special assistant to the Dresden Stasi chief, who was the fixer in chief, the lieutenant-colonel who knew everyone in town and was in charge of organising safe houses and secret apartments for agents and informants, and for procuring goods for the Soviet ‘friends’. ‘He was very interested in certain German idioms. He was really keen on learning such things,’ Jehmlich recalled. He’d seemed a modest and thoughtful comrade: ‘He never pushed himself forward. He was never in the front line,’ he said. He’d been a dutiful husband and father: ‘He was always very kind.’[7]

But relations between the Soviet spies and their Stasi colleagues were sometimes fraught, and Dresden was far more than the East German backwater it may have appeared to be. For one thing, it was on the front line of the smuggling empire that for a long time served as life support for the GDR’s economy. As the home of Robotron, the biggest electronics manufacturer in East Germany, producing mainframe and personal computers and other devices, it was central to the Soviet and GDR battle to illicitly obtain the blueprints and components of Western high-tech goods, making it a key cog in the eastern bloc’s bitter – and failing – struggle to compete militarily with the rapidly developing technology of the West. In the seventies, Robotron had successfully cloned the West’s IBM, and it had developed close ties with West Germany’s Siemens.[8] ‘Most of the East German high-tech smuggling came through Dresden,’ said Franz Sedelmayer, a West German security consultant who later worked with Putin in St Petersburg and started out in the eighties in the family business in Munich selling defence products to NATO and the Middle East.[9] ‘Dresden was a centre for this black trade.’ It was also a centre for the Kommerzielle Koordinierung, a department within the East German foreign trade ministry that specialised in smuggling operations for high-tech goods under embargo from the West. ‘They were exporting antiques and importing high-tech. They were exporting arms and importing high-tech,’ said Sedelmayer. ‘Dresden was always important for the microelectronics industry,’ said Horst Jehmlich.[10] The espionage unit headed by East Germany’s legendary spymaster Markus Wolf ‘did a lot’ for this, added Jehmlich. He remained tight-lipped, however, on what exactly they did.

The Dresden Stasi foreign-intelligence chief, Herbert Kohler, served at the same time as head of its information and technology intelligence unit,[11] a sign of how important smuggling embargoed goods was for the city. Ever since Germany was carved up between East and West in the aftermath of World War II, much of the eastern bloc had relied on the black market and smuggling to survive. The Soviet Union’s coffers were empty after the ravages of the war, and in East Berlin, Zürich and Vienna organised-crime groups worked hand in hand with the Soviet security services to smuggle cigarettes, alcohol, diamonds and rare metals through the black market to replenish the cash stores of the security services of the eastern bloc. Initially the black-market trade had been seen as a temporary necessity, the Communist leaders justifying it to themselves as a blow against the foundations of capitalism. But when, in 1950, the West united against the Soviet-controlled bloc to place an embargo on all high-tech goods that could be used for military means, smuggling became a way of life. The free choices of capitalism and the drive for profit in the West were fuelling a boom in technological development there. By comparison, the planned socialist economy of the eastern bloc was frozen far behind. Its enterprises were bound only to meet annual production plans, its workers and scientists left to procure even the most basic goods through informal connections on the grey market. Isolated by the Iron Curtain, smuggling became the only way for the eastern bloc to keep up with the rapidly developing achievements of the capitalist West.[12]

The East German foreign trade ministry set up the Kommerzielle Koordinierung, appointing the garrulous Alexander Schalck-Golodkowski as its chief. Its mission was to earn illicit hard currency through smuggling, to bankroll the Stasi acquisition of embargoed technology. The KoKo, as it was known, answered first to Markus Wolf’s Stasi espionage department, but then became a force unto itself.[13] A string of front companies was set up across Germany, Austria, Switzerland and Liechtenstein, headed by trusted agents, some with multiple identities, who brought in vitally needed hard currency through smuggling deals and the sale of illicit arms to the Middle East and Africa.[14] All the while, the Soviet masters sought to keep a close eye on these activities. The KGB could access all the embargoed high-tech blueprints and goods collected by the Stasi.[15] Often, the Stasi complained that the intelligence-gathering was a one-way street.

At the time Putin arrived in Dresden, West Germany was becoming ever more important as a source of high-tech goods. The KGB was still recovering from a major blow in the early eighties, when Vladimir Vetrov, an officer in its ‘Directorate T’, which specialised in procuring Western scientific and technological secrets, offered his services to the West. Vetrov handed over the names of all the KGB’s 250 officers working on ‘Line X’, the smuggling of technology, in embassies across the world, as well as thousands of documents which provided a breakdown of the Soviets’ industrial espionage efforts. As a result, forty-seven agents were expelled from France, while the US began to develop an extensive programme to sabotage the Soviets’ illicit procurement networks.

The KGB was doubling down on its efforts in Germany, recruiting agents in companies including Siemens, Bayer, Messerschmidt and Thyssen.[16] Putin was clearly involved in this process, enlisting scientists and businessmen who could assist in the smuggling of Western technology into the eastern bloc. Robotron’s status as the biggest electronics manufacturer in East Germany made it a magnet for visiting businessmen from the West. ‘I know that Putin and his team worked with the West, that they had contacts in the West. But mostly they recruited their agents here,’ said Putin’s Stasi colleague Jehmlich. ‘They went after students before they left for the West. They tried to select them and figure out how they could be interesting for them.’[17]

But Jehmlich was far from aware of all the operations of his KGB ‘friends’, who frequently went behind the backs of their Stasi comrades when recruiting agents, including in the Stasi itself. Jehmlich, for instance, claimed he’d never heard that Putin used a cover name for sensitive operations. But many years later, Putin told students he’d adopted ‘several technical pseudonyms’ for foreign-intelligence operations at that time.[18] One associate from those days said Putin had called himself ‘Platov’, the cover name he’d first been given in the KGB training academy.[19] Another name he reportedly used was ‘Adamov’, which he’d taken in his post as head of the House of Soviet–German Friendship in the neighbouring city of Leipzig.[20]

One of the Stasi operatives Putin worked closely with was a short, round-faced German, Matthias Warnig, who was later to become an integral part of the Putin regime. Warnig was part of a KGB cell organised by Putin in Dresden ‘under the guise of a business consultancy’, one former Stasi officer recruited by Putin later said.[21] In those days, Warnig was a hotshot, said to have recruited at least twenty agents in the 1980s to steal Western military rocket and aircraft technology.[22] He’d risen fast through the ranks since his recruitment in 1974, becoming deputy head of the Stasi’s information and technology unit by 1989.[23]

Putin mostly liked to hang out in a small, lowlit bar in the historic centre of Dresden called Am Tor, a few tram stops into the valley from his KGB base, where he’d meet some of his agents, according to one person who worked with him then.[24] One of the main hunting grounds for operations was the Bellevue Hotel on the banks of the Elbe. As the only hotel in the city open to foreigners, it was an important hive for recruiting visiting Western scientists and businessmen. The hotel was owned by the Stasi’s department of tourism, and its palatial restaurants, cosy bars and elegant bedrooms were fitted out with hidden cameras and bugs. Visiting businessmen were honey-trapped with prostitutes, filmed in their rooms and then blackmailed into working for the East.[25] ‘Of course, it was clear to me we used female agents for these purposes. Every security service does this. Sometimes women can achieve far more than men,’ said Jehmlich with a laugh.[26]

We may never know if Putin took his hunt further afield into the West. We cannot trust the authorised accounts of his KGB contemporaries. He himself has insisted he’d never done so, while his colleagues liked to tell instead of the long, lazy ‘tourist’ trips they took to neighbouring East German towns. But one of Putin’s chief tasks was gathering information on NATO, the ‘main opponent’,[27] and Dresden was an important outpost for recruiting in Munich and in Baden-Württemberg five hundred kilometres away, both home to US military personnel and NATO troops.[28] Many years later a Western banker told me the story of his aunt, a Russian princess, Tatiana von Metternich, who’d married into the German aristocracy and lived in a castle, near Wiesbaden, West Germany, where the US Army had its main base. She’d told her nephew how impressed she’d been by a young KGB officer, Vladimir Putin, who had visited her in her home and taken confession religiously, despite his background in the KGB.[29]

While Putin operated under the radar, in the background, the ground was beginning to shift beneath his feet. Parts of the KGB leadership were becoming ever more cognisant of the Soviet Union’s flagging capacity in the struggle against the West, and had quietly begun preparing for a different phase. Soviet coffers were running on empty, and in the battle to procure Western technology, despite the extensive efforts of the KGB and the Stasi, the eastern bloc was always on the back foot, always playing catch-up and lagging ever further behind the technology of the West. In an era when US president Ronald Reagan had announced a new initiative to build the so-called ‘Star Wars’ system that would defend the United States from nuclear-missile attack, the Soviet bloc ploughed ever greater efforts into securing Western technology, only to become ever more aware of how behind they were.

Since the early eighties, a few progressive members of the KGB had been working on a transformation of sorts. Ensconced in the Institute for World Economy in Moscow, they began working on reforms that could introduce some elements of the market to the Soviet economy in order to create competition, yet retain overall control. When Mikhail Gorbachev took office as General Secretary of the Communist Party in 1985, these ideas were given impetus. Gorbachev launched the political and economic reforms of glasnost and perestroika, which aimed for a gradual loosening of control over the country’s political and economic system. Throughout the eastern bloc, the mood of protest was rising against the repression of Communist rulers, and Gorbachev pressed his colleagues across the Warsaw Pact to pursue similar reforms as the only way to survive and stay ahead of the tide of resentment and dissent. Aware that a collapse could nevertheless be on its way, a small handful of KGB progressives began preparing for a fall.

As if seeing the writing on the wall, in 1986 Markus Wolf, the Stasi’s venerated Spymaster, resigned, ending his reign over East Germany’s feared foreign-intelligence unit, the Hauptverwaltung Aufklärung, where for more than thirty years he’d ruthlessly run operations for the Stasi, known for his ability to relentlessly exploit human weaknesses to blackmail and extort agents into working for him. Under his watch the HVA had penetrated deep into the West German government, and had turned numerous agents thought to be working for the CIA. But now he’d somehow suddenly dropped all that.

Officially, he was helping his brother Konrad write his memoirs of their childhood in Moscow. But behind the scenes he too was preparing for change. He began working closely with the progressive perestroika faction in the KGB, holding secret meetings in his palatial Berlin flat to discuss a gradual liberalisation of the political system.[30] The plans they spoke of were similar to the glasnost reforms Gorbachev had launched in Moscow, where informal political movements were gradually being allowed to emerge and media constraints were being relaxed. But though the talk was of democracy and reform, the plan was always for the security services to remain in control behind the scenes. Later it turned out that Wolf had secretly remained on the Stasi payroll throughout.[31]

Ever more aware of the risks of Communist collapse, in the mid-eighties the KGB quietly launched Operation Luch, to prepare for a potential regime change ahead. Wolf was kept fully aware of it, but his successor as head of the Stasi foreign-intelligence arm was not.[32] In August 1988 the KGB sent a top official, Boris Laptev, to the imposing Soviet embassy in East Berlin to oversee it.[33] Officially, Laptev’s mission was to create a group of operatives who would work secretly in parallel with the official KGB residency to penetrate East German opposition groups. ‘We had to collect information on the opposition movement and put the brakes on any developments, and prevent any moves towards German reunification,’ he later said.[34] But in fact, as the anti-Communist protests grew and the futility of such efforts became ever clearer, his mission became almost the opposite of that. The group instead began to focus on creating a new agent network that would reach deep into the second and third tier of political circles in the GDR. They were looking for agents who could continue to work undercover for the Soviets even in a reunified Germany, untainted by any leadership role before the collapse.[35]

The signs are that Putin was enlisted to play a part in this process. In those days he served as Party secretary,[36] a position that would have put him in frequent contact with Dresden’s SED chief Hans Modrow. The KGB appear to have hoped that they could cultivate Modrow as a potential successor to the long-serving East German leader Erich Honecker, apparently even believing he could lead the country through modest perestroika-like reforms.[37] Vladimir Kryuchkov, the KGB foreign-intelligence chief, paid a special visit to Modrow in Dresden in 1986.[38]

But Honecker had refused to step down until the bitter end, forcing the KGB to dig deeper to recruit agents who would continue to act for them after the fall of the eastern bloc. Kryuchkov would always insist that he never met Putin then, and to deny that Putin played any part in Operation Luch, as did Markus Wolf.[39] But the West German equivalent of MI5, the Bundesamt für Verfassungsschutz, believed the reverse. They later questioned Horst Jehmlich for hours on what Putin had been up to then. Jehmlich suspected that Putin had betrayed him: ‘They tried to recruit people from the second and third tier of our organisation. They went into all organs of power, but they didn’t contact any of the leaders or the generals. They did it all behind our backs.’[40]

Other parts of the Stasi also began secretly preparing. In 1986, Stasi chief Erich Mielke signed off on plans for a squad of elite officers, the Offiziere im besonderen Einsatz, to remain in power in case the rule of the SED suddenly came to an end.[41] The most important phase of securing the Stasi’s future began when they started moving cash via their smuggling networks through a web of firms into the West, in order to create secret cash stores to enable them to maintain operations after the fall. A senior German official estimated that billions of West German marks were siphoned out of East Germany into a string of front companies from 1986.[42]

Putin’s Dresden was a central hub for these preparations. Herbert Kohler, the head of the Dresden HVA, was closely involved in the creation of some of these front companies – so-called ‘operative firms’ – that were to hide their connections with the Stasi and store ‘black cash’ to allow Stasi networks to survive following a collapse.[43] Kohler worked closely with an Austrian businessman named Martin Schlaff, who’d been recruited in the early eighties by the Stasi. Schlaff was tasked with smuggling embargoed components for the construction of a hard-disc factory in Thüringen, near Dresden. Between the end of 1986 and the end of 1988 his firms received more than 130 million marks from the East German government for the top-secret project, which was one of the most expensive ever run by the Stasi. But the plant was never finished. Many of the components never arrived,[44] while hundreds of millions of marks intended for the plant, and from other illicit deals, disappeared into Schlaff front companies in Liechtenstein, Switzerland and Singapore.[45]

These financial transfers took place at the time Putin was serving as the main liaison officer between the KGB and the Stasi in Dresden, in particular with Kohler’s HVA.[46] It’s not clear whether he played any role in them. But many years later, Schlaff’s connections with Putin became clear when the Austrian businessman re-emerged in a network of companies in Europe that were central cogs in the influence operations of the Putin regime.[47] Back in the 1980s Schlaff had travelled at least once to Moscow for talks with Soviet foreign-trade officials.[48]

Most of what Putin did during the Dresden years remains shrouded in mystery, in part because the KGB proved much more effective than the Stasi at destroying and transferring documents before the collapse. ‘With the Russians, we have problems,’ said Sven Scharl, a researcher at the Stasi archives in Dresden.[49] ‘They destroyed almost everything.’ Only fragments remain in the files retrieved from the Stasi of Putin’s activities there. His file is thin, and well-thumbed. There is the order of Stasi chief Erich Mielke of February 8 1988, listing Major Vladimir Vladimirovich Putin as receiving a Bronze Medal of Merit of the National People’s Army. There are the letters from the Dresden Stasi chief Horst Böhm wishing Comrade Putin a happy birthday. There is the seating plan for a dinner celebrating the seventy-first anniversary of the Cheka, the original name for the Soviet secret police, on January 24 1989. There’s the photograph marking the visit of more than forty Stasi, KGB and military officers to the First Guards Tank Army Museum. (Putin peeps out, almost indistinguishable among the grey mass of men.) Then there are the photographs, uncovered only recently, of a loutish and bored-looking Putin in light-grey jacket and bright suede shoes holding flowers and drinking at an award ceremony for the Stasi intelligence unit’s top brass.

The only trace of any operative activity connected to Putin is a letter from him to Böhm, asking for the Dresden Stasi chief’s assistance in restoring the phone connection for an informant in the German police who ‘supports us’. The letter is short on any detail, but the fact of Putin’s direct appeal to Böhm appears to indicate the prominence of his role.[50] Jehmlich indeed later confirmed that Putin became the main KGB liaison officer with the Stasi on behalf of the KGB station chief Vladimir Shirokov. Among the recent finds was one other telltale document: Putin’s Stasi identity card, which would have given him direct access to Stasi buildings and made it easier for him to recruit agents, because he would not have had to mention his affiliation with the KGB.

Many years later, when Putin became president, Markus Wolf and Putin’s former KGB colleagues took care to stress that he had been a nobody when he served in Dresden. Putin was ‘pretty marginal’, Wolf once told a German magazine, and even ‘cleaning ladies’ had received the Bronze Medal awarded to him.[51] The KGB colleague Putin shared an office with on his arrival in Dresden, Vladimir Usoltsev, who was somehow permitted to write a book on those times, took care to emphasise the mundanity of their work, while revealing zero detail about their operations. Though he admitted that he and Putin had worked with ‘illegals’, as the sleeper agents planted undercover were called, he said they’d spent 70 per cent of their time writing ‘senseless reports’.[52] Putin, he claimed, had only managed to recruit two agents during his entire five years in Dresden, and at some point had stopped looking for more, because he realised it was a waste of time. The city was such a provincial backwater that ‘the very fact of our service in Dresden spoke of how we had no future career’, Usoltsev wrote.[53] Putin himself claimed he’d spent so much time drinking beer there that he put on twelve kilos.[54] But the photographs of him in those days do not suggest any such weight gain. Russian state television later proclaimed that Putin was never involved in anything illegal.

But one first-hand account suggests the downplaying of Putin’s activities in Dresden was cover for another mission – one beyond the edge of the law. It suggests that Putin was stationed there precisely because it was a backwater, far from the spying eyes in East Berlin, where the French, the Americans and the West Germans all kept close watch. According to a former member of the far-left Red Army Faction who claimed to have met him in Dresden, Putin had worked in support of members of the group, which sowed terror across West Germany in the seventies and eighties: ‘There was nothing in Dresden, nothing at all, except the radical left. Nobody was watching Dresden, not the Americans, not the West Germans. There was nothing there. Except the one thing: these meetings with those comrades.’[55]

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In the battle for empire between East and West, the Soviet security services had long been deploying what they called their own ‘active measures’ to disrupt and destabilise their opponent. Locked in the Cold War but realising it was too far behind technologically to win any military war, ever since the sixties the Soviet Union had found its strength lay in disinformation, in planting fake rumours in the media to discredit Western leaders, in assassinating political opponents, and in supporting front organisations that would foment wars in the Third World and undermine and sow discord in the West. Among these measures was support for terrorist organisations. Across the Middle East, the KGB had forged ties with numerous Marxist-leaning terror groups, most notably with the PFLP, the Popular Front for the Liberation of Palestine, a splinter group of the Palestine Liberation Organisation that carried out a string of plane hijackings and bomb attacks in the late sixties and seventies. Top-secret documents retrieved from the archives of the Soviet Politburo illustrate the depth of some of these connections. They show the then KGB chief Yury Andropov signing off three requests for Soviet weapons from PFLP leader Wadi Haddad, and describing him as a ‘trusted agent’ of the KGB.[56]

In East Germany, the KGB actively encouraged the Stasi to assist in its ‘political activities’ in the Third World.[57] In fact, support for international terrorism became one of the most important services the Stasi rendered to the KGB.[58] By 1969 the Stasi had opened a clandestine training camp outside East Berlin for members of Yassar Arafat’s PLO.[59] Markus Wolf’s Stasi foreign-intelligence unit became deeply involved in working with terrorist groups across the Arab world, including with the PFLP’s notorious Carlos Ramirez Sanchez, otherwise known as Carlos the Jackal.[60] Stasi military instructors set up a network of terrorist training camps across the Middle East.[61] And when, in 1986, one Stasi counter-intelligence officer, horrified at the mayhem that was starting to reach German soil, tried to disrupt the bombing plots of a group of Libyans that had become active in West Berlin, he was told to back off by Stasi chief Erich Mielke. ‘America is the arch-enemy,’ Mielke had told him. ‘We should concern ourselves with catching American spies and not bother our Libyan friends.’[62] Weeks later a bomb went off at the La Belle discothèque in West Berlin, popular with American soldiers, killing three US servicemen and one civilian, and injuring hundreds more. It later emerged that the KGB had been aware of the activities of the bombers, and knew exactly how they’d smuggled their weapons into Berlin.[63] Apparently all methods were to be permitted in the fight against the US ‘imperialists’.

One former KGB general who defected to the US, Oleg Kalugin, later called these activities ‘the heart and soul of Soviet intelligence’.[64] The former head of Romania’s foreign-intelligence service, Ion Mihai Pacepa, who became the highest-ranking eastern-bloc intelligence officer to defect to the US, had been the first to speak openly about the KGB’s operations with terrorist groups. Pacepa wrote of how the former head of the KGB’s foreign intelligence, General Alexander Sakharovsky, had frequently told him: ‘In today’s world, when nuclear arms have made military force obsolete, terrorism should become our main weapon.’[65] Pacepa also stated that KGB chief Yury Andropov had launched an operation to stoke anti-Israeli and anti-US sentiment in the Arab world. At the same time, he said, domestic terrorism was to be unleashed in the West.[66]